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Tax Credit/Deduction?

a tax credit is a credit towards your tax liability for the year, regardless of refund or tax owed later. but if you didn't have a tax liability may be you will not be able to get it. there are credits that can translate to refunds even if you have no tax liability. EIC is one of them. low income people get cashback from IRS even if they paid zero tax for the whole year. if they did pay tax on their income, not only they will get all the tax back, they will also get EIC money. IRS robs the riches to give to the poor. but I don't think this hybrid cedit is refundable if you have no tax liability. to IRS, if you can afford a hybrid, you are not poor.

for most people that buy cars, they have jobs and have a large tax liability. that credit would just lower that liability. if that translates to a refund, great. if that lowers your tax owed, better. either way it's the same amount of money for you, that IRS took away in every pay check as estimated advance monthly payments towards your actual tax liability. at the end of the year, you then will be able to calculate the exact tax liability and balance it with IRS.

whether you get a refund or tax owed depends on also your W4 "# of of exemptions". you can put in more to get more "money" in every paycheck, but you will likely need pay back at the end of the year to IRS. best is to adjust that number to get it about right.

Tax Credit/Deduction?

Tax Credit/Deduction?

Now guys, don't rip on the CPA if I did a poor job of translating. The bottom line is your tax liability and the Hybrid Tax Credit is the LAST item taken to reduce your tax liability. If you are already getting refund without the Hybrid Tax Credit, then you are most likely (not all cases) not going to benefit from the Hybrid Tax Credit. An example would be my neighbor. He has several children, mortgage interest, medical and a few other deductions. His filing for 2005 showed that he had no taxable income (although he made $52k) and this showed him with zero tax liability, which makes a Hybrid Tax Credit useless to him. He could not have used the Hybrid Tax Credit to INCREASE his refund, because he has no tax liability. In my case I had a tax liabilty of $3900.00 and although I received a refund the Tax Credit would have been useful.

I apologize if I explained it very poorly. Simply put, if you have NO tax liability you can not use the Hybrid Tax Credit to get additional refund dollars.

Tax Credit/Deduction?

Todd, I have to agree with the others. Either you misunderstand what your accountant is saying, or you need a new accountant.

It matters not one whit whether you are receiving a refund, or owe money, at the time of filing. (Believe me, the government doesn't want to discourage people from overpaying, and then taking a refund later. Anything overpaid is an interest-free loan to the government.)

The Hybrid credit is not refundable. That doesn't mean you can't increase the refund you receive. As others pointed out, it means that if the credit would reduce your total tax liability for the year below 0, you cannot end up getting extra money back, beyond simply refunding the taxes you had withheld.

In other words, if your tax liability works out to $10,000 without the credit, and you had $12,000 withheld, a Hybrid tax credit of $3150 would increase you refund from $2000 to $5150.

If your tax liability were $2000 without the credit, and you had withheld $1000, then a Hybrid tax credit of $3150 would mean you get a $1000 refund (NOT a $2150 refund), rather than having to pay $1000. In effect, your hybrid credit is reduced to $1000 in this case.

And if your tax liability were $0, then the Hybrid tax credit would be worthless to you.

The credit is also, apparently, worthless to those of us who live in high tax states and pay AMT....

Tax Credit/Deduction?

It is found in the formula:
"maximum hybrid tax credit" =
"Regular income tax liability
minus the total of these other tax credits
minus the *tentative* minimum tax calculated under the AMT rules."

It should read:
"maximum hybrid tax credit" =
"Regular income tax liability [line 44]
minus the total of these other tax credits
minus the *altentative* minimum tax [line 46] calculated under the AMT rules."

The alternative minimum tax is the difference between the tentative minimum tax and the regular tax. It is typically a very small number. You would have to be very special to get down to that number!